Homeowners look to state for flood insurance relief

Rising water from Tropical Storm Debby left residents in trouble at the Suncoast Gateway Mobile Village in Port Richey. FILE PHOTO

BY JOSH BOATWRIGHTTribune staff

Published: December 15, 2013

Updated: December 16, 2013 at 07:29 AM

As efforts in Congress to curtail a precipitous rise in flood insurance rates came to naught, hope remains that state leaders and private companies will offer a solution for homeowners whose premiums have soared since new rules took effect Oct. 1 in the National Flood Insurance Program.

Over the past month, several companies have begun offering policies that are often a fraction of the government’s cost calculations.

It’s too soon to tell whether this shift to the private market will be a permanent solution for thousands of people in the Tampa Bay area affected by the rate changes.

But homeowners and insurers are heartened by state efforts that appear to be making it viable to sell private flood coverage. The U.S. House of Representatives ended its session last week without taking up the matter.

“Companies that are interested in getting into flood insurance, it should be as easy to do that as possible as long as they meet the burdens they have to meet,” said Sam Miller, executive vice president of the Florida Insurance Council, the state’s largest trade association.

“It remains to be seen, even though there’s interest in it, if there’s going to be private capital to make a huge footprint down here.”

Nearly 200 members of the U.S. House and Senate have come out in support of halting the rate increases called for in the 2012 reform of the federal flood insurance program.

They’ve introduced about a dozen bills looking to delay the premium changes by several years until FEMA conducts an affordability study for the new rates.

None of them gained enough traction for a vote as Congress battled through a government shutdown and tense budget negotiations.

The bipartisan Biggert - Waters Act seeks to fill a $24 billion deficit in the federal flood program by increasing rates that have remained artificially low for older homes.

“We don’t expect a whole lot on the federal front, at least not anytime soon,” Florida Office of Insurance Regulation Deputy Director Richard Koon told the state Senate Banking and Insurance Committee at a meeting last week.

Koon’s office sent out a memo in October to insurers operating in Florida to outline rules for selling private flood policies and several have entered the market.

Tampa-based Homeowners Choice Property & Casualty Insurance Company was approved last week by state regulators to offer primary flood insurance as an endorsement to existing homeowners policies.

“We plan to help them by offering insurance prices at near-current rates without the drastic federal mandated increases anticipated under the Biggert-Waters Act,” company President Scott Wallace said in a statement.

The most popular option for clients of St. Petersburg agent Jake Holehouse is a standalone policy offered by insurance giant Lloyd’s of London.

For people accustomed to paying $1,000 in the federal program to insure their older home, the typical Lloyd’s rate of about $3,000 a year may seem like a drastic leap. When those homeowners see federal rates rise to $9,000, or much more in some cases, the private option seems reasonable, Holehouse said.

Consumers’ willingness to pay premiums that more closely match risk may partly explain why companies that had shied away from selling primary coverage in the past are now entering the market, he said.

“We’ve been caught in these two extremes, extremely low and extremely high, and now what we need to do is get balanced,” he said.

One aim of Brandes’ bill will be to give people more choices in how much coverage they want, allowing for the exclusion of a garage, for example.

“This bill would allow you to not have flood insurance on other structures if you chose to only have your house insured,” Brandes said at a committee meeting last week in Tallahassee.

In order for private policies to pass muster for lenders, though, companies will have to ensure that they offer equivalent coverage to the federal program.

“On a homeowners policy, there are standards that lenders have in place to protect financing of those properties,” Miller said.

Brandes has said he is working closely with the members of the banking and insurance industries to ensure any new state regulations would meet their requirements.

All but one bank accepts the Lloyd’s policy, which is guaranteed to match all the federal program’s standards, Holehouse said.

While Holehouse and others still hope to see reforms in the way the federal government charges for its policies, the influx of private companies has begun to stave off the worst effects of the law.

“What it’s allowing us to do is save homeowners a ton of money and allowing the real estate market to continue to work,” he said.